Rubber recycler plans high-value powders for 2010

Scrap tire recycler Magnum Recycling has started to tackle the pile of 40 million tires at the Hudson, Colo., landfill it acquired last year.

The subsidiary of Fort Lauderdale, Fla.-based Magnum D’Or Resources (OTCBB: MDOR) began sorting and shredding the tires in November in order to produce rubber nuggets and chips that can be used as environmentally friendly substitutes for mulch in playgrounds and gardens. Recycling prevents the harmful environmental effects from improper disposal while displacing the need for virgin rubber.

However, the company’s ambitions rest with higher-value products—namely, rubber powders and custom compounds, Magnum founder and chairman Chad Curtis told the Cleantech Group. Curtis said he expects Magnum to use the shredded tires to produce ultra-fine rubber powder starting at the end of the first quarter of 2010, with custom compounds to follow in the next quarter.

“The operations have started, but the real eye opener is yet to come,” Curtis said.

Magnum already has one small-scale plant in operation in Magog, Quebec, that cleans and shreds scrap tires into nuggets and buffings.

In the first half of 2009, that plant began fulfilling a potential $131 million in orders from National Sales and Supply, also known as Majestic Mulch, for rubber nuggets and buffings made of recycled tires (see Saving the planet, one tire at a time?). The five-year sales agreements allow Magnum to receive payment for up to $131 million in rubber products, although the company can choose to deliver less, Curtis said.

Curtis said selling the recycled nuggets and buffings was a “safety net” that helps produce revenue for the company, which posted $11.3 million in net loss in the quarter ending June 30, 2009.

"We're taking waste products and putting them out there for a good use; however, that was not our main goal," Curtis said. "Our goal was never to be in the lower-end marginal markets. We had to work our way up the totem pole."  

The spot price of the rubber products varies, but Curtis estimated nuggets at about $200 a ton, powder at $520 to $820 a ton, and custom compounds even higher.

Magnum also receives payment to take delivery of scrap tires to the Hudson facility, about $0.05 to $0.15 per pound. Curtis said the content of a typical tire is 14 percent natural rubber, 27 percent synthetic rubber, 28 percent carbon black, 15 percent steel and 16 percent fiber. Magnum can recycle, sell or reactivate all the materials, resulting in no waste product, Curtis said. 

The appeal of the powder market has also drawn the interest of privately owned Danish tire recycler Genan, which expects to break ground this year on a scrap tire processing plant in Houston, Texas. The plant is the first in the U.S. for Genan, which says it is the world’s largest tire recycler (see Denmark's Genan to break ground on first US tire recycling plant).

Genan says its highly automated process deconstructs each tire into 67 percent rubber granulate or powder, 18 percent steel, 14 percent textiles and 1 percent waste. The textiles are burned to produce energy.

Venture-backed Lehigh Technologies of Naples, Fla., is also recycling rubber into fine powders at its 100 million pound manufacturing facility (see Rubber, water and waste get investor interest).

Magnum acquired the Hudson site when it purchased Tire Recycling for about $7 million last year. The company has invested about $1 million to upgrade and clean the plant, and expects to spend an additional $5 million on equipment to produce the powder and custom compounds, Curtis said.

Another Magnum D’Or subsidiary, Magnum Engineering International, plans to deliver the equipment to allow Magnum Recycling to turn the shredded tires into a fine, 40-mesh powder, which can be used to make seals, paints, weather stripping, automotive parts and tires.

Curtis expects Magnum to produce 50,000 tons of the rubber powder in the first 12 months after production begins. He said total capacity of the Hudson facility is estimated at 100,000 tons of rubber powder annually.

Magnum has partnered with a Malaysian company on the next step of the process, which uses a surface activator to reactivate the powder, followed by high tech processing aids to produce a custom compound that can be introduced into production lines. The technology was developed by Sekhar Research Innovations (SRI), which began working with Magnum in October 2008.

The compounds could be used to reduce the cost to make rubber products, including tires and radiators hoses. The recycled compound has the potential to save tire manufacturers anywhere from 4 percent to more than 11 percent in raw material costs, Curtis said.

The process is unique because it allows high concentrations of the recycled material to be used in new tires, Curtis said. He cited third-party testing by the Rubber Research Institute of Malaysia that showed the same performance and properties for an original OEM tire and one that used 20 percent of the Magnum/SRI recycled compound.

In addition, the proprietary machinery and processes result in high purity and consistency of the products, Curtis said.

Magnum has the exclusive license to SRI's technology for North America and first right of refusal for other markets, Curtis said, noting that North America was the company's only focus for the short term.

"It's hard for one to comprehend how big the market is here," said Curtis, who controls more than 60 percent of the company.